The capital investment committee of Arches Landscaping Company is considering two capital investments. The estimated income from operations and net cash flows from each investment are as follows:
| Front-End Loader | Greenhouse | |||||||||
| Year | Income from Operations |
Net Cash Flow |
Income from Operations |
Net Cash Flow |
||||||
| 1 | $56,700 | $185,000 | $119,000 | $296,000 | ||||||
| 2 | 56,700 | 185,000 | 91,000 | 250,000 | ||||||
| 3 | 56,700 | 185,000 | 45,000 | 176,000 | ||||||
| 4 | 56,700 | 185,000 | 20,000 | 120,000 | ||||||
| 5 | 56,700 | 185,000 | 8,500 | 83,000 | ||||||
| Total | $283,500 | $925,000 | $283,500 | $925,000 | ||||||
Each project requires an investment of $540,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 10% for purposes of the net present value analysis.
| Present Value of $1 at Compound Interest | |||||
| Year | 6% | 10% | 12% | 15% | 20% |
| 1 | 0.943 | 0.909 | 0.893 | 0.870 | 0.833 |
| 2 | 0.890 | 0.826 | 0.797 | 0.756 | 0.694 |
| 3 | 0.840 | 0.751 | 0.712 | 0.658 | 0.579 |
| 4 | 0.792 | 0.683 | 0.636 | 0.572 | 0.482 |
| 5 | 0.747 | 0.621 | 0.567 | 0.497 | 0.402 |
| 6 | 0.705 | 0.564 | 0.507 | 0.432 | 0.335 |
| 7 | 0.665 | 0.513 | 0.452 | 0.376 | 0.279 |
| 8 | 0.627 | 0.467 | 0.404 | 0.327 | 0.233 |
| 9 | 0.592 | 0.424 | 0.361 | 0.284 | 0.194 |
| 10 | 0.558 | 0.386 | 0.322 | 0.247 | 0.162 |
Required:
1a. Compute the average rate of return for each investment. If required, round your answer to one decimal place.
| Average Rate of Return | |
| Front-End Loader | % |
| Greenhouse | % |
1b. Compute the net present value for each investment. Use the present value of $1 table above. If required, use the minus sign to indicate a negative net present value.
| Front-End Loader | Greenhouse | |
| Present value of net cash flow | $ | $ |
| Amount to be invested | $ | $ |
| Net present value | $ | $ |
2. Prepare a brief report for the capital investment committee, advising it on the relative merits of the two investments.
The front-end loader has a (smaller / larger) net present value because cash flows occur (earlier / later) in time compared to the greenhouse. Thus, if only one of the two projects can be accepted, the (front-end loader / greenhouse) would be the more attractive.
In: Accounting
In: Accounting
How might the Apple company use the Sensitivity analysis "what if" technique that estimates profit or loss results if sales price, cost, volume or underlying assumptions change? Provide a scenario based using Apple's Iphone? Explain the benefits and disadvantages of the method?
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What are the costs and benefits associated with compensating executives with stock or the option to purchase stock?
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What do you believe are the most effective audit procedures to use to identify executive compensation abuse or fraud? Support your opinions and recommended audit procedures.
audit procedures to use to identify executive compensation abuse or fraud
In: Accounting
Problem 24-3
Metlock Corporation was formed 5 years ago through a public
subscription of common stock. Daniel Brown, who owns 15% of the
common stock, was one of the organizers of Metlock and is its
current president. The company has been successful, but it
currently is experiencing a shortage of funds. On June 10, 2018,
Daniel Brown approached the Topeka National Bank, asking for a
24-month extension on two $34,960 notes, which are due on June 30,
2018, and September 30, 2018. Another note of $6,030 is due on
March 31, 2019, but he expects no difficulty in paying this note on
its due date. Brown explained that Metlock’s cash flow problems are
due primarily to the company’s desire to finance a $299,210 plant
expansion over the next 2 fiscal years through internally generated
funds.
The commercial loan officer of Topeka National Bank requested the
following financial reports for the last 2 fiscal years.
|
METLOCK CORPORATION |
||||
| Assets |
2018 |
2017 |
||
| Cash | $18,280 | $12,630 | ||
| Notes receivable | 147,800 | 132,850 | ||
| Accounts receivable (net) | 131,830 | 124,830 | ||
| Inventories (at cost) | 103,960 | 50,250 | ||
| Plant & equipment (net of depreciation) | 1,441,730 | 1,408,680 | ||
| Total assets | $1,843,600 | $1,729,240 | ||
| Liabilities and Owners’ Equity | ||||
| Accounts payable | $78,440 | $91,050 | ||
| Notes payable | 75,590 | 62,110 | ||
| Accrued liabilities | 12,090 | 6,630 | ||
| Common stock (130,000 shares, $10 par) | 1,312,780 | 1,304,780 | ||
| Retained earningsa | 364,700 | 264,670 | ||
| Total liabilities and stockholders’ equity | $1,843,600 | $1,729,240 | ||
| aCash dividends were paid at the rate of $1 per share in fiscal year 2017 and $2 per share in fiscal year 2018. | ||||
|
METLOCK CORPORATION |
||||
|
2018 |
2017 |
|||
| Sales revenue | $3,014,860 | $2,692,590 | ||
| Cost of goods solda | 1,543,140 | 1,437,230 | ||
| Gross margin | 1,471,720 | 1,255,360 | ||
| Operating expenses | 861,510 | 774,820 | ||
| Income before income taxes | 610,210 | 480,540 | ||
| Income taxes (40%) | 244,084 | 192,216 | ||
| Net income | $366,126 | $288,324 | ||
| aDepreciation charges on the plant and equipment of $100,890 and $103,120 for fiscal years ended March 31, 2017 and 2018, respectively, are included in cost of goods sold. | ||||
(a) Compute the following items for Metlock
Corporation. (Round answer to 2 decimal places, e.g.
2.25 or 2.25%.)
| (1) | Current ratio for fiscal years 2017 and 2018. | |
| (2) | Acid-test (quick) ratio for fiscal years 2017 and 2018. | |
| (3) | Inventory turnover for fiscal year 2018. | |
| (4) | Return on assets for fiscal years 2017 and 2018. (Assume total assets were $1,677,350 at 3/31/16.) | |
| (5) | Percentage change in sales, cost of goods sold, gross margin, and net income after taxes from fiscal year 2017 to 2018. |
In: Accounting
The debits to Work in Process—Roasting Department for Morning Brew Coffee Company for August, together with information concerning production, are as follows: Workinprocess,August1,700pounds,20%completed *Direct materials (700 × $4.70) Conversion (700 × 20% × $1.35) Coffee beans added during August, 14,300 pounds Conversion costs during August Work in process, August 31, 400 pounds, 42% completed Goods finished during August, 14,600 pounds $3,290 189 $3,479 $ 3,479* 65,780 21,942 ? ?
All direct materials are placed in process at the beginning of production. A. Prepare a cost of production report, presenting the following computations: 1. Direct materials and conversion equivalent units of production for August 2. Direct materials and conversion costs per equivalent unit for August 3. Cost of goods finished during August 4. Cost of work in process at August 31 B. Compute and evaluate the change in cost per equivalent unit for direct materials and con- version from the previous month (July
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Accounting Fraud Investigation and Prevention:
please Research the accounting/fraud/forensic field regarding accounting fraud investigation or prevention. What innovative technologies or procedures are helpful in detecting and preventing accounting and financial fraud? I would really like to understand the subject better.
In: Accounting
| Project #1 | ||||||
| Complete the horizontal analysis for 2017 and 2018 for each of the transactions presented. | ||||||
| Prepare the Income Statement, Statement of Changes in Stockholder's Equity, and the Balance Sheet for each year. | ||||||
| Record each of the following transactions in the horizontal model below. Then calculate the ending (12/31/17) balances. | ||||||
| 1. Sterling Cooper Advertising Agency began operations in 2017. They acquired $60,000 in cash in exchange of common stock. | ||||||
| 2. Performed advertising services, earning $30,000 on account and $10,000 in cash. | ||||||
| 3. Purchased supplies on credit $500. | ||||||
| 4. Paid operating expenses of $22,000. | ||||||
| 5. Borrowed $25,000 from the bank by signing bank note (promise to repay) | ||||||
| 6. Purchased land for $30,000 cash. | ||||||
| 7. Collected $24,000 cash from amounts previously recorded in Accounts Receivable. | ||||||
| 8. Supplies on hand at year end amounted to $200. | ||||||
| Sterling Cooper, Inc. had the following transactions during 2018. Record the transactions in the horizontal model below and calculate the (12/31/18) ending balances. | ||||||||
| 1. Performed advertising services earning $35,000 cash and $7,000 on account. | ||||||||
| 2. Paid operating expenses of $24,000. | ||||||||
| 3. Received cash for advertising services yet to be performed, $5,000. | ||||||||
| 4. On October 31th paid rent in advance for the next 6 months, $3,600. | ||||||||
| 5. Paid $400 of A/P. | ||||||||
| 6. Collected $10,000 in cash from amounts previously included in Accounts Receivable. | ||||||||
| 7. At year end Sterling Cooper had earned $4,000 of the $5,000 received in transaction 3. | ||||||||
| 8. Hint: Adjust the Prepaid Rent account | ||||||||
In: Accounting
Direct Materials Variances
The following data relate to the direct materials cost for the production of 2,500 automobile tires:
| Actual: | 48,200 lbs. at $1.75 per lb. | |
| Standard: | 46,800 lbs. at $1.7 per lb. |
a. Determine the direct materials price variance, direct materials quantity variance, and total direct materials cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
| Direct Materials Price Variance | $ | |
| Direct Materials Quantity Variance | $ | |
| Total Direct Materials Cost Variance | $ |
b. The direct materials price variance should
normally be reported to the . If lower amounts of direct
materials had been used because of production efficiencies, the
variance would be reported to the . If the favorable use
of raw materials had been caused by the purchase of higher-quality
raw materials, the variance should be reported to
the .
Direct Materials and Direct Labor Variance Analysis
Abbeville Fixture Company manufactures units in a small manufacturing facility. The units are made from brass. Manufacturing has 30 employees. Each employee presently provides 35 hours of labor per week. Information about a production week is as follows:
| Standard wage per hour | $13.2 |
| Standard labor time per unit | 20 min. |
| Standard number of lbs. of brass | 1.8 lbs. |
| Standard price per lb. of brass | $11.25 |
| Actual price per lb. of brass | $11.5 |
| Actual lbs. of brass used during the week | 11,124 lbs. |
| Number of units produced during the week | 6,000 |
| Actual wage per hour | $13.6 |
| Actual hours for the week (30 employees × 35 hours) | 1,050 hrs. |
Required:
a. Determine the standard cost per unit for direct materials and direct labor. Round the cost per unit to two decimal places.
| Direct materials standard cost per unit | $ |
| Direct labor standard cost per unit | $ |
| Total standard cost per unit | $ |
b. Determine the direct materials price variance, direct materials quantity variance, and total direct materials cost variance. Round your answers to the nearest whole dollar. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
| Direct Materials Price Variance | $ | |
| Direct Materials Quantity Variance | $ | |
| Total Direct Materials Cost Variance | $ |
c. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Round your answers to the nearest whole dollar. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
| Direct Labor Rate Variance | $ | |
| Direct Labor Time Variance | $ | |
| Total Direct Labor Cost Variance | $ |
In: Accounting
In: Accounting
The following data are for the pension plan for the employees of Lockett Company.
12/31/14 1/1/14 12/31/15
Accumulated benefit $2,500,000 $2,600,000 $3,400,000 Obligation Projected benefit 2,700,000 2,800,000 3,700,000 Plan assets (at fair value) 2,300,000 3,000,000 3,300,000 AOCL – net loss 0 480,000 500,000 Settlement rate (for year) 10% 9% Expected rate of return (for year) 8% 7%
Lockett’s contribution was $420,000 in 2015 and benefits paid were $375,000. Lockett estimate that the average remaining service life is 15 years.
(a) What was Lockett’s 2015 actual return on plan assets?
(b) What amount, if any, of the AOCL-Net Loss is amortized in 2015
(c) What amount, if any, was Lockett’s actuarial gain or loss in 2015?
(d) What was Lockett’s service cost for 2015?
In: Accounting
Solve problem
Net present value analysis
Emery communications company is considering the production and marketing of a communications system that will increase the efficiency of messaging for small businesses or branch offices of large companies .Each unit hooked into the system is assigned a mailbox number, which can be matched to a telephone extension number providing access to messages 24 hours a day . Up to 20 people .Personal codes can be reviewed recorded ,cancelled replied or deleted all during the same message play back . Indicators wired to the telephone blink whenever new messages are are present .
to produce this product , a $1.75 million investment in new equipment is required .The equipment will last 10 years but will need major maintaince costing $150,000 at the end of its sixth year . The salvage value of the equipment at the end of 10 years is estimated to be $100,000 . if this new system is produced , working capital must be increased by 90,000 . This capital will be restored at the end of the products 10 year life cycle .Revenue from the sale of the product are estimated at 1,65 million per year . cash operating expenses estimated at 1.32million per year .
Required
1- prepare sechdule of cash flows for the proposed project (Assume that no income tax) ?
2- Assuming that Emery's cost of capital is 12%. compute the project NPV.Should the product be produced ?
In: Accounting
Kiley Company had a $600 credit balance in Allowance for Doubtful Accounts at December 31, 2018, before the current year's provision for uncollectible accounts. Aging of the accounts receivable revealed the following:
|
Estimated Percentage Uncollectible |
||
|
Current accounts |
120,000 |
1% |
|
1-30 days past due |
12,000 |
3% |
|
31-60 days past due |
10,000 |
6% |
|
61-90 days past due |
5,000 |
12% |
|
Over 90 days past due |
8,000 |
30% |
|
Total Accounts Receivable |
155,000 |
(a) Prepare the adjusting entry on December 31, 2018, to recognize bad debts expense.
(b) Assume the same facts as above except that the Allowance for Doubtful Accounts account had a $500 debit balance before the current year's provision for uncollectible accounts. Prepare the adjusting entry for the current year's provision for uncollectible accounts.
(c) Assume that the company has a policy of providing for bad debts at the rate of 1% of Sales, that Sales for 2014 were $400,000, and that Allowance for Doubtful Accounts had a $550 credit balance before adjustment. Prepare the adjusting entry for the current year's provision for bad debts.
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Corporation issues $400,000, 10%, five-year bonds at 95. The total interest expense over the life of the bonds is? with explanation
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